The new plan would grant voting rights only to those inmates sentenced to less than four years in prison, mainly for crimes such as domestic violence, burglary, wounding and assault, The Daily Telegraph.
Under the proposed measure, judges will have the power to remove voting rights for prisoners sentenced to less than four years in jail in certain cases.
Prime Minister David Cameron made it clear he was lifting the ban on prisoner voting reluctantly, a spokesman said.
"We are responding to court judgments," the spokesman said. "We don't want to get into a situation where we are compensating prisoners because we have not complied.
"It is not something the prime minister would do if he were given a free choice on this," the spokesman said of the government's decision to abandon a long-running legal battle in the European courts to prevent inmates voting.
Last month the European Court of Human Rights criticized the "continued failure" by the United Kingdom to comply with its six-year-old judgment that a blanket ban on prisoner voting was unlawful.